Whenever anyone accesses your financial past, this leaves a special mark. Most often, these entries appear when you apply for loans, goods, or services. They may be hard or soft. And some of them may even bring your credit score down. Here is everything you need to know about inquiries on your credit report in 2021.
A History Check Can Be Innocuous
These entries are soft when they relate to pre-approved offers or checks by a company you are working with. Neither can sway your credit score. In comparison, applications for new services result in hard inquiries and a temporary effect on the total. Fortunately, the impact is only moderate. Still, removing hard inquiries from your credit report is vital if they do not reflect the truth. Follow the guides to do it properly.
Suppose you ask for a loan or a credit card. To assess your solvency and determine the interest rate, the lender will access your borrowing history from one, two, or three of the credit data providers. This information is a summary of your borrowing behavior in the past.
In addition, the institution will look at your scores, which are based on specific aspects of your past activity.
- For FICO and VantageScore, the most influential factor is the history of payments.
- How much you owe in total, the age of your records, fresh accounts, and the types of credit products also matter.
If the total is high, the lender assumes you are likely to pay on time, so it extends your credit.
Your request (application) allows the third party to check the information. If the history is tarnished by mistakes including false hard entries, your score will be unfair, which justifies credit repair.
Note that the same records are also checked by recruiters, insurers, and landlords.
You can and should check your data from time to time, too. Any situations unrelated to new credit leave only soft traces, so they do not affect your status.
What Does This Mean for Your Status?
The entries appear as soon as your records are accessed, and they may be relevant for two years. Luckily, their impact is quite weak. In FICO, they can bring your score down by up to five points. Once you show that you are managing the new debt responsibly, the effects vanish.
In most models, they completely disappear in 12 months.
What to Do About the Inquiries on Your Credit Report
Now, you can see why a string of applications within a brief period is a bad idea. Refrain from seeking your accounts in rapid succession. This will cause an unnecessary dip in your score.
On the upside, a bunch of checks for the same purpose are counted as one item. In comparison, if you apply for credit cards, loans, mortgages, and other different types, each will leave a standalone fixed inquiry.
If you are planning to get a car loan or mortgage, refrain from other applications for at least six months. This way, your application is more likely to reflect the best possible total. Rate shopping is okay as checks of the same nature and within a short period of time (two weeks is optimal) are regarded collectively in both FICO and VantageScore.
The only hard checks you can remove are false ones.
This explains why checking the histories regularly is essential. On www.annualcreditreport.com, you can do it for free once a week until April 20, 2022. Previously, this was only possible annually. Generally, mistaken hard inquiries are rare, but if they happen, they bring down your credit status unfairly.
Even more importantly, they can signify attempts to commit fraud. Criminals may have stolen your sensitive information and tried to take out loans in your name. So if you see any suspicious entries, reach out to the lender immediately.
There could also be an innocuous explanation — for example, the partner of a retailer where you applied for a card may have checked your records. If foul play is detected, you need to take immediate action.
There are three critical measures you should take:
- Contact the police.
- Set up a security freeze or fraud alert to prevent further damage.
- Open a formal dispute with the reporting agency to have the information removed.
At this final stage, you can enlist the help of a credit repair agency for faster results. The professionals will collect evidence and contact the bureaus on your behalf. Alternatively, you can do it by yourself for free, but expert assistance will let you achieve the goal faster.
Related: Credit Card Rules to Abide By
Inquiries On Your Credit Report – The Bottom Line
A report inquiry documents access by an authorized party. Entries related to credit applications are hard, and they affect your score. On the other hand, checks by recruiters, insurers, other companies, and even yourself are innocuous items with zero impact.
Through background checks, financial providers assess your ability to manage debt. Knowing the connection between history checks and credit scores, you can time your applications wisely, so they will not have a substantial impact.
Finally, if you see hard inquiries that look suspicious, contact your lender and remove them through formal disputes — i.e., credit repair — if necessary.
Keep an eye out for inquiries on your credit report! They can have a significant impact on your life!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.